EA - Proposes Take Two Acquisition Bid

February 25th, 2008, 01:04

In the latest episode of corporate game company takeovers, Electronic Arts has offered approximately 2 Billion USD, or $26. per share for Take Two Interactive Software in a proposal last week to add the software company to its ranks. ShackNews gives a summary:

Publishing giant Electronic Arts last Tuesday proposed an acquisition of fellow publisher Take-Two at a price of $26 per share, or approximately $2 billion total.

Electronic Arts claims the proposal is more than fair, quoting the $26 share price as a 64 percent increase over Take-Two's recent stock value…

I guess because of how the government is treating Microsoft they think that there is no problem in becoming a monopoly. They will keep buying the companies up and then either buy vivendi/activision or try to ruin them then buy them.

If monopolies were actually punished then this probably wouldn't happen but at least we still will have games from europe even if we have to import them.

--  Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius  and a lot of courage  to move in the opposite direction. (E.F.Schumacher, Economist, Source)

Originally Posted by Brother None
What?
You think new competitors will arrive in North America? Man, EA and ActiBliz are a handful of takeovers away from dominating the market, there's no question of newcomers there.

For example Warner already entered the market. They are to big to get swallowed by EA. With games becoming more and more interesting to the mainstream there is a lot of money that can be earned. Compared to several other entertaining companies even ActiBliz und EA are lightweights. In Germany television broadcasts just entered the market, Pro7Sat1 holds shares from ZeniMax, RTL is going to publish more games. You're right when you say that EA and ActiBliz will dominate the market for the next years, but that's not forever. I believe they have to grow if they don't want to get swallowed themselves (at least EA)

Warner WAS already in the market. They published Z, for example. Under the "Renegate" label.

--  Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius  and a lot of courage  to move in the opposite direction. (E.F.Schumacher, Economist, Source)

Barriers to entry are fairly low for the gaming industry. That's not to say that they don't exist, but they are low compared to a lot of other industries, especially as open-source solutions for many things have arisen. As such, if EA continues to put out crap, simple demand will continue to create an environment where smaller publishers can develop and flourish. True, EA may buy them out as well, but if they keep putting out crap and then spending large sums to essentially put others out of the business, they will eventually fail.

That's not to say that I am happy with the current state of gaming, but I'm not overly concerned either.

Originally Posted by Avantenor
For example Warner already entered the market. They are to big to get swallowed by EA. With games becoming more and more interesting to the mainstream there is a lot of money that can be earned. Compared to several other entertaining companies even ActiBliz und EA are lightweights. In Germany television broadcasts just entered the market, Pro7Sat1 holds shares from ZeniMax, RTL is going to publish more games. You're right when you say that EA and ActiBliz will dominate the market for the next years, but that's not forever. I believe they have to grow if they don't want to get swallowed themselves (at least EA)

I think what he meant is that retail space, especially in the US, is limited and therefor much easier to get for the most "attractive" products. Which are the ones sold by the biggest publishers because they have proven that their products circulate fast.
The shelf space occupied by EA Sports, The Sims and WoW is locked. Nobody else will get it unless the financial arguments are crystal clear.

Entering the market may be manageable, but selling significant numbers is hard.

The big media companies tried to enter the games business before. They all failed because their timing in the console cycle was wrong. This time they are better prepaired though.
Please note that for a giant like Time Warner only mainstream success is attractive. A niche product here and there may be okay, but generally speaking they are working on million-sellers.

Take 2 told EA to take a hike a week ago, which is why EA published this news, to go past the board of directors and straight to the investors. We'll see if they sell once the prize is driven up, but all Take 2 did is made their pre-existing reply public.

I always laugh when a company comes along and offers to buy the company at a huge premium and they claim that it's "too low". They executives just say this because they know that they'll lose their jobs.

Originally Posted by doctor_kaz
I always laugh when a company comes along and offers to buy the company at a huge premium and they claim that it's "too low". They executives just say this because they know that they'll lose their jobs.

If the executives at the takeover company are doing their job the offer should be too low, if they offer more they're wasteing their own shareholder's value. Most of the studies I've seen have been fairly scathing about mergers in general, aquiring companies will generally underestimate costs and overestimate benefits. Its also not necessary for the executives to loose their jobs - certainly in EA's case they've a history of running the compaines into the dirt before they get rid of the people who built them a decade or so later.

Originally Posted by doctor_kaz
I always laugh when a company comes along and offers to buy the company at a huge premium and they claim that it's "too low". They executives just say this because they know that they'll lose their jobs.

That doesn't really have much to do with it.

It's something you say automatically when someone makes a bid. I mean, it's not like you should jump on it. You're supposed to haggle. You're supposed to go "Ten for that you must be mad"

Yip. Believe me, Take Two is sweating in its socks right now, EA is holding all the cards. Take Two hasn't posted a profit in aeons and if this deals falls through, the stockholders will be at the door with torches.

Regardless, if push comes to shove and EA has to go hostile, expect the stockholders to fold like a house of cards.

Of course the deal will go through. Last year Riccitiello stopped the negotiation process because he thought EA should restructure first. Now Zelnick thinks T2 needs more time. In a few months they will find out they΄re all friends.